The debate on the future of the European Union is in full swing. In this column, Bruno Macaes – the Portuguese Minister for Europe – stresses the importance of policy coordination in achieving better integration. One way to do so is via a fiscal union, but this creates unity at the expense of diversity. A second way involves formal contracts and partnerships. But to make this approach less rigid, the political dialogue does not need to be formalised in actual contracts.

The debate on the future of the European Union is now in full swing. Perhaps the most interesting aspect of this debate is the way it harks back to a short clause in the EU's founding document. In the 1957 Treaty of Rome, the signatories pledged to work towards “an ever closer union”. It was never entirely clear what this meant, but that has not stopped many in the UK, the Netherlands, and other countries from arguing that this original ambition is also what is fundamentally wrong with the EU. A review by the Dutch government concluded that the “time for an ever closer union is up”. Last year, Prime Minister Cameron said in an interview that the phrase “is not what the British people want and not what I want”.

In a way, it is not what I want either. The European Union cannot be about the creation of a new nationality and a new superstate to replace existing nations. It aims to be a communication vehicle between different ways of thinking and living, a combination of these differences. What inspires it is the very European fear of becoming a prisoner of nationality, so it cannot aspire to recreate the structures of the national state at the European level.

At the same time, Europe does stand for an integrated space where borders tend to disappear and ideas, people, goods, services, and capital are allowed to move freely. If this is what a close union means, then it resonates deeply with what European citizens want.

Ideas, people, goods, services, and capital. Go over that list and you will quickly realise one crucial piece of the puzzle is still missing. Even those who have no interest in creating a European superstate must wish that this free space of communication includes political choices. We need to break the dynamic of political fragmentation by which public policy in each member state is conducted in isolation. If entrepreneurs, students, and bankers work within a common European space, so should policymakers.

There is an economic reason why we need a framework for policy coordination. Since important markets like finance, energy, technology, and transport are heavily dependent on public policy choices, we will not have a fully integrated internal market until we have some level of integration in the economic policy as well. But there is also a political reason. This has to do with legitimacy. For example, is it not odd that small interest groups within a member state that are affected by a national decision can participate in the policy process, while the interests and concerns of other member states that are just as affected are not taken into account?

Two avenues towards a better integration

There are two main ways to create a common political space to go with economic, social, and financial integration. People as different as Thomas Piketty and Wolfgang Schäuble think that the only way to do it is to replicate in Brussels some of the institutions of a national state. First among them is the budget, so a political union in Europe should in the end take the form of a fiscal union, the gradual mutualisation of public revenue and expenditure, together with stronger discipline to enforce budget rules and decisions.

The problem with the idea is that it creates unity at the expense of diversity. I neither believe in a common European state, nor in states that live reclusively within their borders. These ideas represent two extreme options, equally to be avoided. Every national budget is different because the priorities are different, and so are the delicate compromises between powerful and less powerful groups within each country, something we must seek to preserve.

The second way to promote policy coordination is much more subtle. In order to create an integrated framework for economic policy, the idea has been floated to establish some form of contracts or partnerships. Member states would commit to a number of structural reforms in exchange for the necessary support to make such reforms successful. The power to decide and implement a given reform programme would remain within national governments and parliaments, but there would be a mechanism at the European level to empower governments and give them a push for reform. Member states ought to recognise that cross-border coordination creates positive spillover effects, and that in the case of structural reform a valid constituency exists beyond their borders.

The idea is a good one but perhaps too rigid. We do need to increase the level of policy dialogue in Europe, but it does not need to be formalised in actual contracts. What we need is for the Commission to use all its ample powers in fiscal guidance, competition law, and the internal market, together with its financial resources in order to encourage and support economic policies that are mutually compatible and reinforcing. An ever closer union between ever different countries – that, we can agree on.